Chinese Developer Agrees to Pay More Than $1 Million in City Hall Corruption Case

The company behind a $700 million DTLA project was accused of bribing public officials to get permits and approvals

In the past seven months, five people have been arrested or pled guilty to federal charges as part of the ongoing investigation into pay-to-play practices and public corruption tied to City Hall. Throughout that time, observers of the process have wondered when developers accused of bribing public officials would be pulled into the fracas.

Now, that has happened.

The office of U.S. Attorney Nicola T. Hanna this morning announced that the Arcadia-based subsidiary of a Chinese developer pushing a $700 million downtown project has agreed to pay $1,050,000 to resolve an investigation into the company’s conduct with elected officials.

The deal with Jia Yuan USA Co., Inc., a subsidiary of Shenzhen Hazens, was signed Monday morning and revealed today; the company is required to pay the penalty within two weeks. The three-year “non-prosecution agreement” calls for Jia Yuan and its parent company to cooperate with the investigation.

Jia Yuan representatives could not immediately be reached for comment.

In 2014, Shenzhen Hazens paid $100 million to acquire the Luxe City Center Hotel, which is across from L.A. Live in downtown’s South Park neighborhood. The new owner soon unveiled plans for a mammoth reinvention of the site, complete with two towers holding 435 condominiums and a W Hotel, along with 80,000 square feet of retail space.

To get the necessary city approvals, the company solicited the aid of José Huizar, the now-disgraced District 14 councilman who was arrested in June and has been charged by federal investigators with 34 criminal counts, including bribery, money laundering, and violating the RICO statute. Huizar, whose offices and home were raided by the FBI in November 2017, has pleaded not guilty. A trial is scheduled for next June.

Huizar has been accused of riding herd on a criminal enterprise that sought to enrich its members by securing more than $1.5 million in bribes and other benefits from developers seeking to build large projects in downtown. Huizar has been accused of receiving expensive vacations that included hotel stays and casino chips, and soliciting campaign donations for his wife Richelle Huizar’s run for his council seat (she abandoned the campaign shortly after the FBI raids).

The Luxe development emerged as a key point of the federal investigation in May, when authorities announced that real estate consultant George Chiang had agreed to plead guilty to a racketeering charge. Court documents at the time detailed lengthy discussions about efforts to have company representatives direct $100,000 to a political action committee benefitting Richelle Huizar’s campaign.

According to the Department of Justice, a “statement of facts” for the Jia Yuan agreement details numerous areas where Shenzhen Hazens received help and provided benefits to Huizar and those working with him. It alleges, among other things, that a Jia Yuan employee provided Huizar with Katy Perry concert tickets after Huizar and another city official—who documents appear to indicate is former Deputy Mayor Ray Chan (though Chan has not been formally named)—intervened in a compliance issue involving a hotel owned by Hazens.

The statement of facts also says that people working for Jia Yuan made campaign donations to multiple political candidates, and then were reimbursed. A Department of Justice statement said this came “at the direction of a foreign national, who was prohibited from participating in U.S. elections.”

Other activities outlined in the statement of facts include Shenzhen Hazens partially subsidizing a trip that Huizar and his family took to China, and, according to the DOJ, “the chairman of the Hazens companies facilitated an introduction that resulted in a contract that paid indirect bribe payments to Huizar, who, in his official capacity, introduced and voted on a motion to benefit the Luxe Hotel project.”

The full City Council approved plans for the Luxe replacement in 2017, though the development has not broken ground. The project came under additional fire this past June, when City Attorney Mike Feuer asked the City Planning Department to revoke some of the mega-development’s permits, including one allowing alcohol sales. City Planning Director Vince Bertoni quickly began steps to revoke the permits.

Federal authorities said they have agreed not to prosecute Jia Yuan for three years because the company has cooperated with the investigation, including providing records that were in China, and making the company’s chairman available for an interview, even while outside the reach of U.S. law enforcement. The DOJ also said the company terminated Chiang as a consultant.

In addition to Huizar and Chiang, those caught up in the pay-to-play investigation include former District 12 Councilman Mitch Englander, who pleaded guilty to scheming to falsify material facts, and George Esparza, a onetime Huizar aide who pleaded guilty to conspiring to violate the RICO statue.

In the wake of Huizar’s arrest, his council colleagues voted to suspend him, and City Controller Ron Galperin froze payment of his more than $200,000-a-year salary. On October 15 former state Senator Kevin de León, who won a March election to succeed Huizar, is scheduled to be installed as the new representative of the district that includes downtown, Boyle Heights, and portions of Northeast Los Angeles.

Federal officials have said that the investigation is ongoing.

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